chapter-08-stock-valuation-5

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71. Douglass Gardens pays an annual dividend that is
expected to increase by 4.1 percent per year. The stock commands a market rate
of return of 12.6 percent and sells for $24.90 a share. What is the expected
amount of the next dividend?
A. $2.03
B. $2.12
C. $3.17
D. $2.20
E. $2.28

72. Atlas Mines has adopted a policy of increasing the
annual dividend on its common stock at a constant rate of 2.75 percent
annually. The firm just paid an annual dividend of $1.67. What will the
dividend be six years from now?
A. $1.88
B. $1.92
C. $1.97
D. $2.02
E. $2.05

73. A stock pays a constant annual dividend and sells
for $56.10 a share. If the market rate of return on this stock is 15.85
percent, what is the amount of the next annual dividend?
A. $7.67
B. $7.94
C. $8.21
D. $8.89
E. $10.30

74. You want to purchase some shares of Green World
stock but need a 15 percent rate of return to compensate for the perceived risk
of such ownership. What is the maximum you are willing to spend per share to
buy this stock if the company pays a constant $0.90 annual dividend per
share?
A. $5.40
B. $6.00
C. $6.90
D. $7.20
E. $7.80

75. Home Canning Products common stock sells for
$44.96 a share and has a market rate of return of 12.8 percent. The company
just paid an annual dividend of $1.04 per share. What is the dividend growth
rate?
A. 8.29 percent
B. 8.45 percent
C. 9.23 percent
D. 9.67 percent
E. 10.25 percent

76. Winter Time Adventures is going to pay an annual
dividend of $2.86 a share on its common stock next year. This year, the company
paid a dividend of $2.75 a share. The company adheres to a constant rate of growth
dividend policy. What will one share of this common stock be worth five years
from now if the applicable discount rate is 11.7 percent?
A. $43.45
B. $43.87
C. $44.15
D. $45.19
E. $47.00

77. Hightower Pharmacy just paid a $3.10 annual
dividend. The company has a policy of increasing the dividend by 3.8 percent
annually. You would like to purchase 100 shares of stock in this firm but
realize that you will not have the funds to do so for another four years. If
you require a 16 percent rate of return, how much will you be willing to pay
per share for the 100 shares when you can afford to make this investment?
A. $29.50
B. $30.62
C. $31.12
D. $31.78
E. $32.47

78. National Warehousing just announced it is
increasing its annual dividend to $1.18 next year and establishing a policy
whereby the dividend will increase by 3.25 percent annually thereafter. How
much will one share of this stock be worth 8 years from now if the required
rate of return is 9.5 percent?
A. $24.38
B. $25.68
C. $26.51
D. $27.02
E. $27.37

79. Shares of Hot Donuts common stock are currently
selling for $32.35. The last annual dividend paid was $1.10 per share and the
market rate of return is 10.7 percent. At what rate is the dividend
growing?
A. 7.06 percent
B. 8.67 percent
C. 10.42 percent
D. 12.60 percent
E. 14.10 percent

80. Combined Communications is a new firm in a rapidly
growing industry. The company is planning on increasing its annual dividend by
15 percent a year for the next 4 years and then decreasing the growth rate to
3.5 percent per year. The company just paid its annual dividend in the amount
of $0.20 per share. What is the current value of one share of this stock if the
required rate of return is 15.5 percent?
A. $1.82
B. $2.04
C. $2.49
D. $2.71
E. $3.05

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